The IRS recently issued Revenue Procedure 2024-40 announcing increases to the federal estate and gift tax exemption and the gift tax annual exclusion for the 2025 tax year, among numerous adjustments to other tax provisions. The 2025 tax law changes are subject to the results of the November elections, particularly if one party achieves control of the White House and both branches of Congress.
The proposed changes include:
Estate and Gift Tax Exemption. The 2025 federal estate and gift tax exemption will be increased to $13,990,000, up from $13,610,000 in 2024. This generally means that an estate of a decedent who dies in 2025 with combined assets and prior taxable gifts in excess of $13,990,000 must file a federal estate tax return (Form 706), and federal estate tax may be due. With proper estate and tax planning, the federal exemption amount for married couples is double the individual exemption, or $27,980,000 in 2025.
Gift Tax Annual Exclusion. The 2025 annual exclusion for gifts will be $19,000, up from $18,000 in 2024. With this change, in 2025, an individual may gift up to $19,000 to an unlimited number of recipients without federal gift tax consequences (meaning the gifts do not consume a taxpayer’s federal gift tax exemption and no gift tax return is generally required). Married couples may gift up to double that amount ($38,000) to each person in 2025 without federal gift tax consequences.
Estate and Gift Tax Planning. The level of federal estate and gift tax planning that is appropriate varies based on personal circumstances. Because the federal estate and gift tax exemption is set to decrease to $5,000,000 plus inflation (currently estimated to be roughly $7,000,000) in 2026, and could change sooner if new law is enacted, now is a good time to consider tax planning options for your estate plan.
If you have any questions about how these changes may impact your estate planning, please contact an attorney in our estate planning practice group, including Ryan Montgomery, Kaitlyn K. Perez, Allison Int-Hout, Matthew Hart, or Kara Kalenius Novak.